Australian farmers are about to get even lower prices for their milk

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Murray Goulburn, the largest dairy processor in Australia, sees profits flat for the next year as the global milk glut continues.

And that means farmers will get even less for their milk.

The cooperative expects to pay farmers $4.80 a kilogram, at the lower end of the $4.75 to $5.00 range set in April.

A short time ago, the price of Murray Goulburn unit trusts on the ASX were up 0.8% to $1.145.

Murray Goulburn now says it expects a 2017 financial year net profit of $42 million, around the upper limit of the 2016 range which had been brought down from initial expectations of $89 million.

“Global conditions have not improved,” says interim CEO David Mallinson.

“The latest data suggests excess global inventories, including the impact of European intervention, may have surpassed the equivalent of 6 billion litres of milk.”

Murray Goulburn’s forecast is based on the assumption that commodity prices will continue to trade at current levels for the rest of the 2016 calendar year with only a modest recovery in price of around 6% the second half of the 2017 financial year.

“We acknowledge FY17 will be a challenging year for our suppliers,” says Mallinson.

“We have set a robust forecast, and while there are a number of areas which may provide upside to our FY17 forecast, we do not believe it is prudent to include these in our forecast at this stage.”

Murray Goulburn managing director Gary Helou stepped down as a global diary glut forced the cooperative to downgrade its profit forecasts by at least a third and to cut prices paid to farmers.

The cooperative is due to announce its full year results on August 24.

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